As with other rules, the SEBI in a bid to make the process of investing in mutual funds in minor child's name uniform across asset management companies has come out with some of the changes in rules which you as a potential investor should know. In its circular for the current month, the market regulator said, the move was aimed at bringing uniformity in such investment process across asset management companies (AMCs).
New guidelines for mutual fund investment in minor's name:
In its respect, the market regulator said, "the AMCs shall insist upon a Change of Pay-out Bank mandate before redemption is processed". For investment in minor's name, the new guidelines suggest that for mutual fund investment, payment through any of the mode shall be accepted only through the minor's account either solely or through a joint account which is in the minor's name as well as the parent's name.
According to SEBI, AMCs are required to "build a system control at the account set up stage of Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP) on the basis of which, the standing instruction is suspended when the minor attains majority, till the status is changed to major."
Also, when the minor person attains maturity, the person needs to show up all the KYC details, updated bank accounts that includes cancelled original cheque leaflet of the new account. Further, no transaction in respect of the investment shall be entertained unless the minor child attains maturity.
In respect of faster transmission of mutual fund investments, AMCs will work on image based processing in case the claimant is a joint holder or nominee in the investment folio. Also, an uniform rule will need to be worked out for treatment of unclaimed funds wherein they need to be transferred to the claimant that includes the unclaimed dividends.
Also, SEBI has asked the AMFI to come up with forms and formats as well as uniform documents and procedure for treatment of unclaimed funds within one month of the release of the circular.